INDO INDUSTRIES LTD, MUMBAI V. ITO 2(2)(1), MUMBAI

ITA 183/MUM/2014

• Counselvise Citation: 18319914 RSA 2014
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Bench Allotted: L
• Next Hearing Date: 07-10-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 07-01-2014
• Court: TRIBUNAL
• Department Lawyers: VIVEK ANAND PERAMPURNA
• Keywords: Business income; Double taxation relief; Services rendered outside India; Permanent establishment; Non-deduction of tax
• Section: 143(3); 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL L , BENCH MUMBAI . . , , BEFORE : SHRI R.C.SHARMA , A M & SHRI VIVEK VARMA , J M ./ ITA NO. 183 / MUM/20 1 4 ( / ASSESSMENT YEAR : 2010 - 20 11 ) M/S INDO INDUSTRIES LIMITED, A/1, SAMEER APARTMENT, 169, S.V.ROAD, ANDHERI (W), MUMBAI - 58 . VS. ITO - 2(2)(2)(1) , MUMBAI . ./ ./ PAN/GIR NO. : A A AC I 8197 D ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI BHUPENDRA SHAH /REVENUE BY : SHRI VIVEK ANAND PERAMPURNA / DATE OF HEARING : 7 TH OCT . 201 4 / DAT E OF PRONOUNCEMENT : 14 TH NOV , 201 4 / O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER CIT(A ) , DATED 15 - 11 - 2013 FOR ASSESSMENT YEAR 2010 - 2011 , IN THE MATTER OF ORDER PASSED U/S. 144 R.W.S. 143(3) OF THE I.T. ACT ON THE FOLLOWING GROUNDS : - 1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN DISALLOWING EXPORT COMMISSION OF RS. 92,14,509/ - , U/S40A(I) R.W.S.195. 2) IN THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING DISALLOWANCE OF EXPORT COMMISSION OF RS. 92,14,509/ - U/S40(A)(I) R.W.S 195 MADE BY ASSESSING OFFICER. 3) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNE D ASSESSING OFFICER ERRED IN CHARGING INTEREST U/S.234A,B AND C AND ALSO INITIATING PENALTY U/S.271(1)(C). RELIEF PRAYED : 1 ) . TO DELETE THE DISALLOWANCE OF EXPORT COMMISSION OF RS. 92,14,509/ - . 2 ) TO DELETE THE INTEREST LEVIED U/S.234A,B,C. 3) T O DELETE THE INITIATION OF PENALTY U/S.271(1)(C). ITA NO. 183 /1 4 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS E NGAGED IN EXPORTING COTTON YARN AND TRADING IN VARIOUS TYPES OF FABRICS IN DOMESTIC MARKETS. DURING THE YE AR UNDER CONSIDERATION ASSESSEE HAS MADE FOREIGN REMITTANCE OF RS. 92,14,509/ - BY WAY OF COMMISSION PAYMENT TO FOREIGN AGENTS WITHOUT DEDUCTING TDS ON THE SAME. ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY TDS AS PER PROVISIONS OF SECTION 195 OF THE IT ACT WA S NOT DEDUCTED ON SUCH COMMISSION PAYMENT TO FOREIGN AGENTS. TH E ASSESSEE VIDE ITS REPLY DATED 12.11.2012 HAS STATED AS UNDER : - 'WE WOULD LIKE TO INFORM YOU THAT WE ARE GOVERNMENT RECOGNIZED STAR EXPORT HOUSE SE LL ING YARN AND FABRICS TO 26 COUNTRIES, AC ROSS 5 CONTINENTS. ALSO BEING MERCHANT EXPORTER, WE OUTSOURCE THE MATERIAL FROM VARIOUS MANUFACTURERS. HENCE, TO DO BUSINESS, COMMISSION HAS TO BE PAID TO VARIOUS INDIAN AND FOREIGN COMMISSION AGENTS. OUR FOREIGN COMMISSION AGENTS ARE NON - RESIDENTS, WHIC H DO NOT HAVE ANY PERMANENT ESTABLISHED OR BUSINESS CONNECTION IN INDIA. THE FOREIGN AGENTS RENDER THEIR SERVICES ABROAD FOR WHICH THEY ARE ENTITLED TO RECEIVE COMMISSION ABROAD FOR THE SERVICES RENDERED BY WAY OF SEARCHING PROSPECTIVE FOREIGN BUYERS/CLIEN TS. ALSO, THE PAYMENT IS ALSO RECEIVED BY THE FOREIGN AGENTS DIRECTLY OUTSIDE INDIA IN THEIR COUNTRY. SINCE THEIR INCOME IS NOT CHARGEABLE TO TAX IN INDIA AT ALL, THEN THERE IS NO NEED TO DEDUCT ANY T D S WHILE MAKING PAYMENT. IN FOLLOWING CASE LAWS THE ABO VE MATTER IS UPHELD - GE INDIA TECHNOLOGY CEN. (P) LTD. VS. COMMISSIONER OF INCOME - TAX(2010) 193 TAXMAN 234 (SC) C IT I VS. TOSHOKU LIMITED (125 ITR 525)(SC) I NCOME - TAX APPELLATE TRIBUNAL JUDGMENT, NEW D ELHI IN THE CAS E OF ACIT VS. NIDHI EXPORTS. ASS ESSEE HAS ALSO RELIED ON C BDT CIRCULAR NO.786 DTD. 07/02/2000 FOR ITS CLAIM ON NON DEDUCTION OF T D S. THE AO DID NOT CONVINCE WITH THE ASSESSEES REPLY AND DISALLOWED COMMISSION PAYMENT TO FOREIGN AGENTS BY OBSERVING AS UNDER : - ITA NO. 183 /1 4 3 IN THE CASE OF ASSESSEE, THE FOREIGN AGENTS COMMISSION INCOME IS DEEMED TO HAVE ACCRUED OR ARISEN IN INDIA, IN AS MUCH AS THE COMMISSION INCOME IS EARNED FROM; 1. INCOME FROM EXPORTS WHICH HAS ACCRUED AND ARISE FROM A BUSINES S SOURCE IN INDIA AND TAXED IN INDIA. 2. THE COMMI SSION IS PAID ON THE EXPORT OF GOODS ON WHICH INCOME ACCRUED OR ARISE I.E. THE SOURCE OF INCOME IS IN INDIA. 3. THE PAYMENT OF COMMISSION CANNOT BE DEHORS FROM EARNING OF INCOME FROM SUCH EXPORT. 4. THE EXPENDITURE OF COMMISSION IS DEBITED/ ACCOUNTED IN THE BOO KS OF THE ASSESSEE IN INDIA: I.E THE SOURCE OF COMMISSION PAYMENT (INCOME) TO NON RESIDENT IS IN INDIA. 5. THE DEBT HAS BEEN INCURRED IN INDIA - IN THE BOOKS OF ASSESSEE IN FAVOUR THE COMMISSION AGENTS. 6. THE FOREIGN AGENT HAVE ESTABLISHED BUSINESS CONNECTION WITH THE ASSESSEE WHICH VERY MUCH FALLS WITHIN THE MEANING OF BUSINESS CONNECTION AS PRONOUNCED BY VARIOUS COURTS IN THE CONTEXT OF SECTION 9(1)(I) OF THE INCOME- TAX ACT, 1961 7. THEREFORE, THE INCOME OF COMMISSION ACCRUES A ND ARISE IN INDIA AND CONSEQUENTLY LIABLE FOR DEDUCTION OF T DS IN INDIA IN TERMS OF SECTION 195 READ WITH SECT ION 9(1) OF THE INCOME TAX ACT. 3 . BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO AFTER OBSERVING AS UNDER : - THE AO HAS BASED HIS REASONI NG ONTO THE RULING GIVEN BY AAR IN THE CASE OF SKF BOILERS PVT LIMITED. THIS RELATES TO THE PERIOD AFTER THE WITHDRAWAL OF THAT CIRCULAR NO 786 [I.E. AFTER 22.10.2009]. THE RULING IS BASED ON THE APPLICABILITY OF THE PROVISIONS OF SECTIONS 5(2)(B) AND 9(1 )(I). NO REFERENCE TO DTAA BETWEEN INDIA & PAKISTAN WAS MADE THERE AS THE APPLICANT IN THAT CASE DID NOT CONTEND THAT IT WAS AVAILING OF BENEFIT S UNDER THE PROVISION OF THE DT AA WITH PAKISTAN. THE RULING IN THE CASE OF RAJIV MALHOTRA [SUPRA] HAD COME HOWEV ER IN THE YEAR 2006 WHEN THE SAID CIRCULAR 786 WAS IN FORCE BUT, THE ISSUE IN THAT CASE WAS NOT THE COMMISSION PAID ON EXPORT SALES RATHER THE ISS UE WAS THE PAYMENT OF COMMISSION TO FOREIGN AGENTS FOR MOBILIZING THE FOREIGN PARTICIPANTS TO TAKE PART INTO T HE 4TH INDIA FOOD A WINE SHOW ORGANIZED BY THAT APPLICANT [IN INDIA]. THUS, THE CIRCULAR NO. 786 WAS NOT APPLICABLE IN THE CASE OF THAT APPLICANT. THE AAR IN THAT CASE, HOWEVER, HAD TAKEN INTO ACCOUNT THE VARIOUS PROVISIONS CONTAINED IN DTAA BETWEEN INDIA AND THE FRENCH REPUBLIC [THE AGENTS WAS FROM FRANCE] AND HAD RULED THAT THE TAXABILITY OF COMMISSION INCOME TO A FOREIGN AGENT WAS GOVERNED BY PARA 3 OF ARTICLE 23 OF THAT AGREEMENT WHICH PROVIDED THAT THE ITEM OF INCOME OF A RESIDENT OF A CONTRACTING STAT E NOT DEALT WITH IN THE FOREGOING ARTICLES AND ARISING IN OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER CONTRACTING STATE. IN THAT MANNER, THE AAR CONSIDERED THE PROVISION AS CONTAINED IN PARAGRAPH 3 OF THE ARTICLE 23 OF THAT DT AA AT PAR WITH THE PROV ISIONS OF SECTION 5( 2) R.W.S.9(1) ITA NO. 183 /1 4 4 AND DID NOT GRANT ANY FURTHER BENEFIT. THE AAR IN THAT CASE RULED THAT THE APPLICANT WAS REQUIRED TO DEDUCT TAX AT SOURCE U/S 195 FROM THE PAYMENTS WHICH WERE TO BE REMITTED BY THE RESIDENT APPLICANT TO THE NON - RESIDENT AG ENT. IN THE PRESENT CASE, THE RELEVANT ART I CLE IS 22 [DT AA BETWEEN INDIA A BRAZIL] WHICH IS SIMILAR TO PARAGRAPH 3 OF THE ARTICLE 23 OF DTAA BETWEEN INDIA A FRANCE. 4.1.3 THUS, IN MY CONSIDERED VIEW, THE A O HAS RIGHTLY INFERRED THAT THE ASSESSEE WAS LIAB LE TO MAKE TDS U/S 195 AND DEPOSIT THE SAME TO THE GOVERNMENT ACCOUNT IN ACCORDANCE TO THE PROVISIONS OF I T ACT AND SINCE THAT WAS NOT DONE, HE HAS, RIGHTLY DISALLOWED THE SUM SO PAID TO THE FOREIGN AGENTS. THE DISALLOWANCE OF RS. 92,14,509/ - U/S 40(A)(I) IS ACCORDINGLY CONFIRMED. 4 . AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5 . LEARNED AR APPEARING ON BEHALF OF ASSESSEE CONTENDED THAT ISSUE IS SQUARELY COVERED BY THE DECISION OF VARIOUS BENCHES OF TRIBUNAL AS WELL AS HIGH COURT AND ALSO THE HON BLE SUPREME COURT. RELIANCE WAS PLACED ON DECISION OF BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF EXOTIC FRUITS (P) LTD., 40 TAXMANN.COM 348 , WHEREIN IT WAS HELD THAT COMMISSION PAID TO NON - RESIDENT AGENTS WITHOUT DEDUCTION OF TD S IS NOT LIABLE TO DISALLOW ON THE PLEA THAT SERVICE S OF NON - RESIDENT AGENTS WERE RENDERED OUTSIDE INDIA AND COMMISSION WAS ALSO PAID OUTSIDE INDIA, INCOME OF SUCH AGENTS BY WAY OF COMMISSION COULD NOT BE CONSIDERED AS ACCRUED OR ARISEN OR DEEMED TO ACCRUE OR ARISE IN INDIA. IT WAS FURTHER HELD THAT IN THE ABSENCE OF PERMANENT ESTABLISHMENT(S) OF SUCH AGENTS IN INDIA, INCOMES OF SAID AGENTS WERE NOT LIABLE TO BE TAXED IN INDIA AND, AS SUCH, ASSESSEE WAS NOT OBLIGED TO EFFECT ANY DEDUCTION OF TAX ON COMMISSI ON PAYMENTS MADE TO AGENTS WHO WERE POSITIONED OVERSEAS. RELIANCE WAS ALSO PLACED ON THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF COMEX EXPORTS (P) LTD., 45 TAXMANN.COM 406 , WHEREIN IT WAS HELD THAT THE PAYMENT OF COMMISSION TO FOREIGN AGEN TS FOR RENDERING SERVICES ITA NO. 183 /1 4 5 ABROAD IN VIEW OF THE FACT THAT THOSE AGENTS DO NOT HAVE PERMANENT ESTABLISHMENT IN INDIA AND MOREOVER SERVICES RENDERED WERE NOT IN THE NATURE OF TECHNICAL SERVICES, INCOME COULD NOT BE SAID TO ACCRUE OR ARISE IN INDIA AND, THUS, ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENTS TO SAID AGENTS. SIMILAR VIEW WAS TAKEN BY CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF FARIDA PRIME TANNERY (P) LTD., 45 TAXMANN.COM 174 . 6 . LEARNED AR ALSO INVITED OUR ATTENTION TO TH E DECISION OF HON BLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CEN. (P) LTD. 193 TAXMAN 234(SC) , WHEREIN FOLLOWING WAS THE OBSERVATION OF HON BLE SUPREME COURT : - SECTION 195 IMPOSES A STATUTORY OBLIGATION ON ANY PERSON RESPONSIBLE FOR PAYING TO A NON - RESIDENT ANY INTEREST (NOT BEING INTEREST ON SECURITIES) OR ANY OTHER SUM (NOT BEING DIVIDEND) CHARGEABLE UNDER THE PROVISIONS OF THE ACT, TO DEDUCT INCOME - TAX AT THE RATES IN FORCE UNLESS HE IS LIABLE TO PAY INCOME - TAX THEREON AS AN AGENT. PAYMENT TO NON - RESIDENTS BY WAY OF ROYALLY AND PAYMENT FOR TECHNICAL SERVICES RENDERED IN INDIA ARE COMMON EXAMPLES OF SUMS CHARGEABLE UNDER THE PROVISIONS OF THE INCOME - TAX ACT TO WHICH THE AFORESTATED REQUIREMENT OF TAX DEDUCTION AT SOURCE APPLIES. Q/ THE TAX SO C OLLECTED AND DEDUCTED IS REQUIRED TO BE PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT IN TERMS OF SECTION 200, READ WITH RULE 30 OF THE INCOME - TAX RULES, 1962. FAILURE TO DEDUCT TAX OR TO PAY TAX WOULD ALSO RENDER A PERSON LIABLE TO PENALTY UNDER SECTION 20 1, READ WITH SECTION 221. IN ADDITION, HE WOULD ALSO BE LIABLE UNDER SECTION 201 (JA) TO PAY SIMPLE INTEREST AT 12 PER CENT PER ANNUM ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX WAS ACTUALLY PAID. THE MOST IMPORTANT EXPRESSION IN SECTION 195(1) CONSISTS OF THE WORDS 'CHARGEABLE UNDER THE PROVISIONS OF THE ACT'. A PERSON PAYING INTEREST OR ANY OTHER SUM TO A NON - RESIDENT IS NOT LIABLE TO DEDUCT TAX ([SUCH SUM IS NOT CHARGEABLE TO TAX UNDER THE ACT. F OR INSTANCE, WHERE THERE IS NO OBLIGATION ON THE PART OF THE PAYER AND NO RIGHT TO RECEIVE THE SUM BY THE ''RECIPIENT DOES NOT ARISE OUT OF ANY CONTRACT OR OBLIGATION BETWEEN THE PAYER AND THE RECIPIENT BUT IS MADE VOLUNTARILY, SUCH PAYMENTS CANNOT BE REGA RDED AS INCOME UNDER THE ACT. SECTION 195 CONTEMPLATES NOT MERELY AMOUNTS, THE WHOLE OF WHICH ARE PURE INCOME PAYMENTS , IT ALSO COMPOSITE PAYMENTS WHICH HAVE AN ELEMENT OF INCOME EMBEDDED OR INCORPORATED IN THEM. THUS, WHERE AN AMOUNT IS PAYABLE TO A NON - R ESI DENT, THE PAYER IS UNDER AN OBLIGATION TO DEDUCT T D S IN RESPECT OF SUCH COMPOSITE PAYME NTS. THE OBLIGATION TO DEDUCT TD S IS, HOWEVER, LIMITED TO T HE ITA NO. 183 /1 4 6 APPROPRIATE PROPORTION OF INCOME CHARGEABLE UNDER THE ACT FORMING PART OF THE GROSS SUM OF MONEY PAYABLE TO THE NON - RESIDENT. THIS OBLIGATION BEING LIMITED TO THE APPROPRIATE PROPORTION OF INCOME FLOWS FROM THE WORDS USED IN SECTION 195(1), NAMELY, CHARGEABLE UNDER THE PROVISIONS OF THE ACT'. IT IS FOR THIS REASON THAT VIDE CIRCULAR NO. 728, DATED 30 - 10 - 1995 , THE CBDT HAS CLARIFIED THAT THE TAX DEDUCTOR CAN TAKE INTO CONSIDERATION THE EFFECT OF THE DTAA IN RESPECT OF PAYMENT OF ROYALTIES AND TECHNICAL FEES WHILE DEDUCTING T D S. IT MAY ALSO BE NOTED THAT SECTION 195(1) IS I N IDENTICAL TERMS WITH SECTION 18(3B) OF THE 1922 ACT. IN CIT V. COOPER ENGG. LTD.[1968] 68 ITR 457 (BOM.) IT WAS POINTED OUT THAT IF THE PAYMENT MADE BY THE RESIDENT TO THE NON - RESIDENT IS AN AMOUNT WHICH IS NOT CHARGEABLE TO TAX IN INDIA, THEN NO TAX IS DEDUCTIBLE AT SOURCE EVEN THOUGH THE ASSESSEE MAY NOT HAVE MADE AN APPLICATION UNDER SECTION 18(3B) [NOW SECTION 195(2)]. THE APPLICATION OF SECTION 195(2) PRESUPPOSES THAT THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT TO THE NON - RESIDENT IS IN NO DOUBT THAT TAX IS PAYABLE IN RESPECT OF SOME PART OF THE AMOUNT TO BE REMI TTED TO A NON - RESIDENT BUT IS NOT SURE AS TO WHAT SHOULD BE THE PORTION SO TAXABLE OR IS NOT SURE AS TO THE AMOUNT OF TAX TO BE DEDUCTED. IN SUCH A SITUATION, HE IS REQUIRED TO MAKE AN APPLICATION TO THE ITO ('TDS) FOR DETERMIN ING THE AMOUNT. IT IS ONLY WHEN THESE CONDITIONS ARE SATISFIED AND AN APPLICATION IS MADE TO THE ITO(TDS), THAT THE QUESTION OF MAKING AN ORDER UNDER SECTION 195(2) WILL ARISE. WHILE DECIDING THE SCOPE OF SECTION 195(2), IT IS IMPORTANT TO NOTE THAT THE T AX WHICH IS REQUIRED TO BE DEDUCTED AT SOURCE IS DEDUCTIBLE ONLY OUT OF THE CHARGEABLE SUM. THIS IS THE UNDERLYING PRINCIPLE OF SECTION 195. HENCE, APART FROM SECTION 9(1), SECTIONS 4, 5, 9, 90 AND 91 AS WELL AS THE PROVISIONS OF THE DTAA AR E ALSO RELEVANT , WHILE APPLYING TAX DEDUCTION AT SOURCE PROVISIONS. REFERENCE TO THE ITO (TDS) UNDER SECTION 195(2) OR 195(3) EITHER BY THE NON - RESIDENT OR BY THE RESIDENT PRAYER IS TO AVOID ANY FUTURE HASSLES FOR BOTH RESIDENT AS WELL AS NON - RESIDENT. SECTION 195(2) AND 195(3) ARE SAFEGUARDS. THE SAID PROVISIONS ARE OF PRACTICAL IMPORTAN CE. 7 . RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF WIZCRAFT INTERNATIONAL ENTERTAINMENT (P) LTD., 45 TAXMANN.COM 24 , WHEREIN IT WAS HELD THAT SI NCE INCOME OF FOREIGN AGENTS DID NOT FROM PERSONAL ACTIVITIES IN CONTRACTING STATE AS ENTERTAINER OR ATHLETE, CLAUSE (2) OF ARTICLE 18 OF INDIA UK DTAA DID NOT APPLY TO ASSESSEES CASE. ACCORDINGLY, COMMISSION INCOME WAS HELD TO BE NOT CHARGEABLE TO TAX IN INDIA AND THE TRIBUNAL WAS JUSTIFIED IN DELETING THE DISALLOWANCE SO MADE. ITA NO. 183 /1 4 7 8 . ON THE OTHER HAND, IT WAS CONTENDED BY LEARNED DR THAT THE VERY FACT THAT COMMISSION WAS PAID POINTS TO THE CONCLUSION THAT SPECIALIZED SERVICES WERE RENDERED, OTHERWISE, IF THE ASSESSEE HIMSELF WAS ABLE TO PERFORM SUCH FUNCTIONS, THERE WAS NO NEED TO PAY ANY COMMISSION TO ANYBODY. THE ASSESSEE AVERS THAT ONLY ORAL AGREEMENTS HAVE BEEN MADE WHICH IS AGREED. HOWEVER, IF THE ASSESSEE CONTENDS THAT NO SUCH SERVICES WERE PROVIDED BY THE COMMISSION AGENTS, THEN THE ONUS WAS UNTO HIM TO PROVE THE SAME, WHICH HAS NOT BEEN DONE AT ANY STAGE, EITHER DURING ASSESSMENT OR BEFORE THE HIGHER APPELLATE AUTHORITIES. IN FACT THE EXACT NATURE OF SERVICES PROVIDED REMAINS UNEXPLAINED . OUR ATTENTION WAS ALSO DRAWN BY LEARNED DR TO THE FACT THAT THE ASSESSEE HAS CONTINUALLY ENGAGED WITH SAME COMMISSION AGENTS ON A REGULAR BASIS AND OVER A PROLONGED PERIOD, HENCE THE CONCLUSION THAT THERE IS A BUSINESS CONNECTION CANNOT BE D ENIED. IF THERE EXISTS A BUS INESS CONNECTION WITH INDIA, THE INCOME OF OVERSEAS COMMISSION AGENTS COMES UNDER THE AMBIT OF TAXABILITY CONSIDERING THE PROVISIONS OF SECTION 5(2)(B) READ WITH SECTION 9(1)(I). THEN THE NONRESIDENT COMMISSION AGENT CAN INVOKE THE PROVISIONS OF DTAA IF AN Y. IF THERE IS NO DTAA WITH THE COUNTRY OF COMMISSION AGENT, THEN THE PAYMENT OF COMMISSION COMES STRAIGHTAWAY UNDER THE AMBIT OF TAXABILITY, AND AS NATURAL CONSEQUENCE TDS HAS TO DEDUCTED ON IT U/S 195. LEARNED DR FURTHER CONTENDED THAT NOW IN THE ABSENCE OF ANY WRITTEN AGREEMENT WITH THE AGENTS WHICH COULD CLARIFY THE EXTENT OF SERVICES RENDERED, HOW COULD THE ASSESSEE CLAIM WITH CERTAINTY THAT THE R EMITTANCES DID NOT INCLUDE ANY AMOUNT WHICH COULD BE CHARACTERIZED AS COMMISSION AGENT'S INCOME? THERE IS N O OCCASION FOR THE ASSESSEE TO STEP IN THE SHOES OF NONRESIDENTS AND THAT TOO WITHOUT ACCESS TO BASIC ITA NO. 183 /1 4 8 INFORMATION LIKE TAX RESIDENCY CERTIFICATES. MORE SO WHEN HALF OF THE TRANSACTIONS ARE ENTERED INTO WITH AGENTS OF COUNTRIES WITH WHOM INDIA HAS NO DTAA. IN SUCH A SCENARIO THE PROPER COURSE OF ACTION WAS TO APPR OACH THE ASSESSING OFFICER FOR DETERMINING THE TAXABLE PORTION. IF THE ASSESSEE HAS FAILED TO DO SO THEN NATURALLY TDS SHOULD HAVE BEEN DEDUCTED ON THE WHOLE AMOUNT REMITTED WHETHER OR NOT THE PAYM ENTS COULD BE CONSIDERED AS FTS . 9 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD WE FOUND THAT DURING THE YEAR ASSESSEE HAS PAID COMMISSION TO VARIOUS NON - RESIDENT FOREIGN BROKERS AMOUNTING TO RS. 92,14,509/ - FOR RENDERING SERVICES OUTSIDE INDIA IN RELATION TO EXPORT ORDERS AND RECOVERY OF THE SALE PROCEEDS. NOTHING WAS BROUGHT O N RECORD BY THE AO TO ESTABLISH THAT THE SAID NON - RESIDENT BROKERS HAVE THEIR PLACE OF ESTABLISHMENT IN INDIA BECAUSE THEY WERE OPERATING IN THEIR RESPECTIVE COUNTRIES . THE SAID NON - RESIDENT BROKERS ARE NOT LIABLE TO ANY TAX IN INDIA INSOFAR AS I T IS ALSO NOT THE CASE OF REVENUE THAT SERVICES WERE RENDERED IN INDIA, THEREFORE, NEITHER THERE WAS ACCRUAL NOR RECEIPT OF INCOME IN INDIA. WE FOUND THAT THE NON - RESIDENT BROKERS HAVE NOT RENDERED ANY SERVICES IN INDIA, THEREFORE, COMMISSION INCOME NEITHER ACCRUED NOR AROSE IN INDIA IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF EON TECHNOLOGY PVT. LTD., 343 ITR 366 (DEL) . THERE IS NO DISPUTE TO THE WELL SETTLED PROPOSITION THAT PROVISIONS OF SECTION 195 DOES NOT APPLY WHEN NO INCOME IS FOUND TO BE TAXABLE IN INDIA, THEREFORE, THERE WAS NO REASON FOR MAKING ANY DISALLOWANCE UNDER PROVISIONS OF SECTION 40(A)(I) IN ITA NO. 183 /1 4 9 VIEW OF DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF G.E.INDIA TECHNOLOGY CENTRE PVT. LTD., 327 ITR 456 . T HERE ARE ALSO JUDI CIAL PRONOUNCEMENTS SUPPORTING THIS PROPOSITION, WHICH ARE REPORTED IN 10 ITR 501(TRIB), 86 ITD 102 AND 10 ITR 147(TRIB) . 10 . PAYMENT OF BROKERAGE TO THE SAID NON - RESIDENT BROKERS FOR NON TECHNICAL SERVICES IS THE BUSINESS INCOME OF THE PAYEE AND THEREFO RE, NOT LIABLE TO TAX IN INDIA AS WAS HELD IN THE CASE OF SRI SUBHARAMAN SUBRAMANIAN, 30 TAXMANN.COM 236 (BANG.) . WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE LEARNED DR THAT BROKERAGE SO PAID TO THE NON - RESIDENT BROKERS WAS FEE FOR TECHNICAL SERVICES . OUR VIEW IS SUPPORTED BY THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ADIDAS SOURCING LTD., 28 TAXMANN.COM 267 (DEL) . EVEN THE AMENDED SECTION 9 APPLIES ONLY TO TECHNICAL SERVICES AND NOT TO BROKERAGE. ACCORDINGLY, THE PAYMENT OF BROKER AGE TO NON - RESIDENT DID NOT ATTRACT THE PROVISIONS OF SECTION 9 R.W.S.195 AS WAS HELD BY THE DELHI BENCH IN THE CASE OF ANGELIQUE INTERNATIONAL LTD., 28 TAXMANN.COM 219 (DEL) AND ALLAHABAD BENCH OF THE TRIBUNAL IN THE CASE OF MODEL EXIMS, 42 TAXMANN.COM 44 6 (ALL) . 11 . IN VIEW OF THE ABOVE, WE CAN SAFELY CONCL UDE THAT MERELY BECAUSE PAYMENTS HAVE BEEN MADE FROM INDIA, THE SAME CANNOT BE M ADE LIABLE TO BE TAXED IN INDIA I NSOFAR AS PAYMENT WAS MADE TO NON - RESIDENT FOR THE SERVICES RENDERED OUTSIDE INDIA AS WA S HELD IN THE CASE OF DR. REDDYS LABORATORY, 58 ITD 104 (HYD.) . ITA NO. 183 /1 4 10 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 / 1 1 / 201 4 . 14 / 1 1 / 2014 SD/ - SD/ - ( ) ( VIVEK VARMA ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 14 / 1 1 /2014 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//